Internet America Reports Fiscal First Quarter Results

Business Wire, Oct 28, 2008

HOUSTON -- Internet America, Inc. (OTCBB:GEEK) today announced results for the fiscal first quarter ended September 30, 2008. Wireless broadband Internet revenue increased by $155,000, or 17.5% to $1,041,000 in the first quarter of fiscal 2009, and the Company's wireless broadband Internet subscriber count increased by 5.3% to 7,900 as of September 30, 2008, compared to 7,500 as of September 30, 2007. For the first quarter, wireless broadband Internet revenue of $1,041,000 represented 51.9% of total revenue compared to 40.8% of total revenue as of September 30, 2007. The Company has not completed any acquisitions in the last twelve months; during this time management focused on network improvements which will increase potential for organically growing the Company's wireless Broadband business in the future. Total revenues for the first quarter decreased by 7.7% to approximately $2.0 million compared to total revenues of approximately $2.2 million in the first quarter of 2008. Internet America's total subscriber count decreased to 29,000 on September 30, 2008 compared to 34,400 subscribers at the end of the same period last year. These decreases were due to the anticipated decline of dial-up Internet service customers from Internet America's legacy dial-up Internet operations.

Net loss for the first quarter of 2009 was approximately $311,000, or a loss of $0.02 per share, compared to net loss of approximately $374,000, or $0.03 per share in the same period last year. EBITDA loss (earnings before interest, taxes, depreciation and amortization) was reduced by 94.6% to approximately $5,000 in the first quarter compared to EBITDA loss of approximately $93,000 in the first quarter a year ago. Net loss and EBITDA (loss) were positively impacted in the first quarter of 2009 by decreases in all costs associated with connectivity and operations, sales and marketing and general and administrative expenses.

Billy Ladin, Chairman and Chief Executive Officer of Internet America, said, "Over the past twelve months, the Company took steps to better prepare the Company for a more difficult economic environment. First, we completed private placements in the fall of 2007 to provide ample capital to make investments in infrastructure and withstand temporary operating losses. We then entered into a nine month process of improving quality and customer satisfaction as well as simplifying our internal systems and procedures. Having made major strides toward quality, efficiency, and system-wide improvements, we have now turned our attention to addressing the declining subscriber base and decrease in total revenues and the related impact on profitability while facing a now present economic turndown."

He continued, "Quality process implementation improvements have substantially improved our productivity, as this can be measured in ways such as headcount, which was reduced from 93 in total employees in December, 2007, to less than 60 at the end of October, 2008. At the same time we, have made investments in our infrastructure to improve quality and network capacity by investing approximately $1.2 million in fiscal 2008 and continued with an additional $36,000 in the quarter ending September 30, 2008. Today, Internet America is a leaner, more efficient organization that is better prepared to sustain more challenging economic times. We believe that we have sufficient capital resources and cash on hand to withstand a short or prolonged economic downturn and we are in a strong position to grow internally and through acquisition should the economy strengthen."

Internet America is a leading Internet service provider serving the Texas market. Based in Houston, Internet America offers businesses and individuals a wide array of Internet services including broadband Internet delivered wirelessly and over DSL, dedicated high-speed access, web hosting, and dial-up Internet access. Internet America provides customers a wide range of related value-added services, including Fax-2-Email, online backup and storage solutions, parental control software, and global roaming solutions. Internet America focuses on the speed and quality of its Internet services and its commitment to providing excellent customer care. Additional information on Internet America is available on the Company's web site at http://www.internetamerica.com.

In this press release, the Company refers to a non-GAAP financial measure called EBITDA because of management's belief that this measure is a financial indicator of the Company's ability to internally generate operating funds. Management also believes that this non-GAAP financial measure is useful information to investors because it is widely used by professional research analysts in the valuation and investment recommendations of companies in the Company's peer group. EBITDA should not be considered an alternative to net income, as defined by GAAP.

This press release may contain forward-looking statements relating to future business expectations. These statements, specifically including management's beliefs, expectations and goals, are subject to many uncertainties that exist in Internet America's operations and business environment. Business plans may change, and actual results may differ materially as a result of a number of risk factors. These risks include, without limitation, that (1) we will not be able to increase our rural customer base at the expected rate, (2) we will not improve EBITDA, profitability or product margins, (3) we will not be able to identify and negotiate acquisitions of wireless broadband Internet customers and infrastructure on attractive terms or successfully integrate those acquisitions into our operations, (4) needed financing will not be available to us if and as needed, (5) we will not be competitive with existing or new competitors, (6) we will not keep up with industry pricing or technological developments impacting the Internet, (7) we will be adversely affected by dependence on network infrastructure, telecommunications providers and other vendors or by regulatory changes, (8) service interruptions or impediments could harm our business; (9) we may be accused of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to use certain technologies in the future, (10) government regulations could force us to change our business practices, (11) we may be unable to hire and retain qualified personnel, including our key executive officers, (12) provisions in our certificate of incorporation, bylaws and shareholder rights plan could limit our share price and delay a change of management; and (13) our stock price has been volatile historically and may continue to be volatile. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our other publicly filed reports and documents.